Which term is a legal statement of fact that is true to the best of one's knowledge?

• A. Warranty
• B. Estoppel
• C. Representation
• D. Indemnity

Answer: (C)

A representation is a statement of fact made by the applicant about the risk, believed to be true to the best of their knowledge at the time of application. This description fits what the question asks because it highlights the insured’s belief about the facts as they understand them, rather than a guaranteed condition. Insurance underwriting relies on these representations to assess risk, and if they’re true to the best of knowledge, they’re treated as legitimate statements informing the contract.

Understanding the other terms helps see why this is the correct choice: a warranty is an absolute promise about a fact that must remain true for the contract to stay in force; if a warranty is breached, the insurer may have grounds to void the policy. Indemnity is about compensating the insured for losses already incurred, not about statements of fact. Estoppel is a legal doctrine that prevents someone from asserting something contrary to a prior position if someone else relied on it; it’s a principle, not a statement of fact in the application.